Shares in positioning and workflow technology company Trimble (TRMB +1.12%) rose by 14.5% in the week to Friday morning. The move comes after a well-received set of fourth-quarter earnings released on Monday.
Challenging end markets, excellent execution
Some of Trimble's end markets are currently challenging. For example, management referenced softness in agriculture, transportation, and residential construction on the recent earnings call.
As such, its product revenue declined by $13 million to $403 million year over year in the fourth quarter. However, this was more than offset by an $89 million increase in its subscription and services revenue to $530 million, and overall revenue increased by 9% reported and 3% on an organic basis.
NASDAQ: TRMB
Key Data Points
Strong underlying growth
Still, that's only part of the story. The real news is, arguably, coming from its 13% increase in annualized recurring revenue (ARR) in the fourth quarter and over the full year. ARR is Trimble's key metric as its revenue mix is slowly shifting toward more recurring streams in line with its stated aim to be a more significant part of its customer's daily workflow.
Instead of just providing exact positioning services to key markets like construction, infrastructure, transportation, geospatial/mapping, and agriculture, Trimble's analytics and modeling capability enables customers to optimize their operations continuously.
Image source: Getty Images.
The company is growing its ARR via particularly strong performance in buildings and infrastructure, where it grew bookings in its architects, engineers, contractors, and owners (AECO) by 30% in the fourth quarter, with almost half the bookings coming from its Trimble Construction 1 (TC1) solution. Management sees TC1 as a framework that can benefit from cross-selling opportunities.
With ARR and now free cash flow growing at an impressive rate, Trimble is an attractive stock for investors.
